The Energy Information Agency predicted the retirement of up to 60 gigawatts of coal-fired electricity generation by 2020. A significant contributor to that evolution was the Mercury and Air Toxics Standard or MATS Rule. Until today that is, when a 5-4 majority on the Supreme Court concluded in Michigan v. EPA that EPA’s failure to consider cost in deciding to regulate power plant emissions was improper.

"Pope Francis Stands Up to Climate Deniers," or so says the editorial board of the Newark Star Ledger. Yes, but the headline could have read, "Pope says No to Cap and Trade."
In his ENCYCLICAL LETTER LAUDATO SI’ OF THE HOLY FATHER FRANCIS ON CARE FOR OUR COMMON HOME, Pope Francis calls for an honest discussion on environmental issues that divide us, both politically and geographically. While the advance press fed expectations that the encyclical would be all about climate change and humankind’s role in causing it, our read is that the Holy See’s perspective on climate change is part of a larger message.

Floods on the Rio Blanco these past few days demonstrate the link to climate change, but not in the way you think. It was a horrible Memorial Day weekend in Hays County, Texas. At least three people died from the worst flooding seen since 1922. The Rio Blanco crested at 43 feet, 30 feet over flood stage. Over 400 homes were destroyed and the interstate (I-35) was under water.

When the draft of EPA's Clean Power Plan was promulgated in the Federal Register last June, one of the critical questions raised by those in the electricity space was: what about reliability? If you shut down all those coal plants, will you have enough generation from other sources to keep the lights on? Even if you have enough generation, will you have enough natural gas at the times and places when you need it? Is there enough time to get the needed generation and resources in place under EPA's schedule?

It’s been a long winter in my neck of the woods and not because Punxsutawney Phil saw his shadow. Pipes froze. Twice. Furnace was out overnight. Broke three shovels. So I had a particular interest this past Wednesday, March 11, in FERC’s Eastern Regional Technical Conference on EPA’s Clean Power Plan (CPP) and FERC’s and EPA’s takes on reliability issues.
After the introductions EPA Assistant Administrator Janet McCabe led off with the same position she had delivered at the Opening Conference, which is something of a mantra for EPA: EPA has enforced the Clean Air Act for over forty years and has not impacted reliability. Commissioner Tony Clark, however and politely, was not buying it. To be sure, EPA’s Clean Air Act initiatives had not brought the Grid crashing down. But he enumerated half-a-dozen facilities where EPA regulations had impacted reliability, including the Presque Isle Power Plant, the Potomac River Generating Station, and the E.D. Edwards Power Station.
Commissioner Clark laid it out plain and simple: any time there is a “must run” requirement imposed on a plant, that is a reliability issue. Where operators have made decisions to close because plants are no longer profitable as a result of the cost of environmental compliance, but reliability concerns have compelled the plants to keep operating, that is a case of environmental regulations impacting reliability.
Commissioner Moeller asked Ms. McCabe for EPA guidance on how reliability could be ensured under the CPP, the so-called “reliability safety valve” (RSV). She responded without specifics, saying merely that EPA is prepared to work with everyone. To that Commissioner Moeller was very plain: a reliability safety valve needs to be in the final rule. Period.
What were the details driving Commissioners Moeller and Clark? They are set out in great detail in the written comments of the affected generators. A few were stated at the technical conference:
New England - RGGI, the Regional Greenhouse Gas Initiative, has put New England in excellent position to meet the CPP goals. But even with the early mover advantage, New England has substantial concerns. As Commissioner Paul Roberti of the Rhode Island Public Utilities Commission reported, the independent system operator, ISO-NE, forecasts 8300 MW are to be retired by 2020, to be replaced by 6300 MW, with an additional 1000 MW in efficiency improvements. Even assuming all of that can be built in time and the forecast efficiency is real, New England has gas transmission challenges (as demonstrated by skyrocketing prices and unavailability during the 2013 polar vortex) and electrical transmission challenges (the substantial wind resources identified in northern Maine are 100 miles from the nearest transmission). As Steve Rourke, a VP of ISO-NE, commented: even as New England's fuel mix starts to change, those current coal plants are needed on the coldest and hottest days.
Duke Energy - Paul Newton, the State President for North Carolina for Duke, stated flatly that EPA's interim compliance deadlines leave no room to ensure compliance can be achieved without compromising reliability. In February, North Carolina set records for demand at 7 a.m. Why did he select 7 a.m. to report? Because that is a time when non-dispatchable generation assets cannot provide power.
The Southern Company - Jeff Burleson, System Planning Vice President for Southern, explained how Southern plans for the future. It looks at each plant (as it must because regional capacity can only be based on individual plant capacity). EPA predicts that Southern will need to retire 9 GW as a result of the CPP, in addition to 3 GW as a result of MATS (Mercury and Air Toxics Standards). In response, Southern anticipates needing 5 GW of new gas-fired plants. There is one small impediment: current gas pipelines in the region are fully subscribed. Mr. Burleson also commented that demand response is estimated to be able to shave peak demand by about 10% and that that is already included in Southern's planning.
The environmental perspective is that reliability issues are manageable. As John Wilson, the Director of Research for the Southern Alliance for Clean Energy, commented, "the sky is not falling" and there is plenty of solar and wind energy available. Energy efficiency will help too. In sum, the Alliance's studies show that "ensuring reliability can be business as usual." Johnny Casana of EDP was a little more equivocal, if the suite of low carbon strategies can ensure reliability, then the RSV may not be needed. Jonathan Peress with the Environmental Defense Fund advised that their studies showed that there is ample pipeline capacity in New England if it is used efficiently.
Some may remain unconvinced. The solar and wind resources don't meet Mr. Newton's 7 a.m. need. One might legitimately be skeptical that "business as usual" can possibly apply to something that (to paraphrase Commisioner Moeller) is the most comprehensive and profound rule ever to come out of the Clean Air Act. EPA's own estimate of over 50 GWs in plant retirements belies that. As for efficient use of gas pipelines, all are for that. But theoretical efficiency worked out in an office is not much salve as the temperatures drop and the pipes burst because the gas has not gotten to where it efficiently should.
Mary Walker, representing the Georgia Environmental Protection Division, best summed it all up. What is needed is “economic dispatch v. environmental dispatch.” When a state's environmental regulator is talking the language of FERC, it is worth listening to. As Ms. Walker noted, the environmental regulator in Georgia is being asked to implement energy policy, which it hasn't done before.
A bit of jocularity between Administrator McCabe and Chairman LaFleur puts the issue, we think, in perspective. Ms. McCabe owned up to her lack of knowledge regarding the sources of unreliability – squirrels, she had been informed by her staff, affect reliability. The Chairman referred to an apocryphal "throw-down squirrel" that linemen carry on their trucks. But linemen don't need a throw-down squirrel, squirrel outages are very real. So what do we have? One regulator, “learning something new every day;” the other regulator dispensing the wisdom of the ages, so to speak. As we move forward with what both regulator and regulatee have referred to as the most significant regulation of the Grid ever, we suspect that many will want the people that really know, rather than the people who are picking it up as they go, in charge of keeping the lights on.

Last week, FERC held the eastern regional technical conference on “Environmental Regulations and Electric Reliability, Wholesale Electricity Markets, and Energy Infrastructure.” The purpose was for the commissioners to hear the specific issues created by EPA’s Clean Power Plan (CPP) relevant to the states, utilities, generators, consumers and transmission operators covered by ISO-New England, Inc., PJM Interconnection LLC, New York Independent System Operator, the Southeastern Regional Transmission Planning, South Carolina Regional Transmission Planning, Florida Reliability Coordinating Council, and the Northern Maine Independent System Administrator.
The overwhelming theme of the morning was that, to effectively comply with the CPP, the states, and state commissions, need more time. Most of the speakers recommended that EPA do away with the interim (2020-2029) compliance goals, complaining that there isn’t time between the likely date of the final rule (mid-summer 2015) and 2020 to plan for retirement of existing resources, and to permit, finance, and construct new natural gas combined cycle plants and the natural gas infrastructure on which these new plants will depend. James Frauen from Seminole Electric Cooperative noted that the draft rule would require Florida to rely “almost completely” on natural gas, all of which must be imported. According to Frauen, the one new gas pipeline currently proposed to be built in Florida is already 91% subscribed. (Not to mention that, in regulated markets, the premature retirement of coal plants means stranded assets which must be paid for by the same ratepayers who must finance the new sources.)
Mike Kormos, VP of Operations for PJM, frankly stated, “[PJM] needs time and transparency.” He explained that he couldn’t predict the impact of the CPP on reliability because of the unknowns. “We don’t know what the final rule is,” he continued, “we don’t know what will be in the state implementation plans, and we don’t know how the market will respond.” (Note that PJM modeled regional implementation of the CPP using the draft rules though at least one state complained that such modeling was premature.)
Which begs the question: what is the rush? Why not give the states more than one year to propose their SIPs and more than just two years for regional SIPs? Keep in mind that the Regional Greenhouse Gas Initiative (RGGI) – a voluntary agreement – took close to five years to develop. The answer may be found in the collision of politics and policy.
That President Obama has made the reversal of climate change, and particularly reduction of greenhouse gas emissions, a cornerstone of his second term should come as no surprise. Between his 2008 statement that “under my plan. . . electricity rates necessarily would skyrocket,” and his 2009 pledge in Copenhagen to reduce emissions “17% below 2005 levels by 2020,” he made his intentions clear. After failing to get climate change legislation through Congress in 2010, he turned to EPA. Despite rumors that the rules had to wait until after the 2012 election, it now seems unlikely that they would have been ready before then. What does seem likely is that the Administration wants to have the rules – and the SIPs – firmly in place before Obama leaves office, in January 2017. Hence, the rush.
When the final rule is issued this summer, as EPA continues to promise it will be, the states will have one year to file their SIPs, unless this requirement is stayed pending litigation. After EPA reviews the SIPs, the states will have roughly two to three years to begin implementation. The states will be in the same Catch-22 that they found themselves in with the Affordable Care Act: Cash-strapped states may waste time and resources planning for a law that could be thrown out or substantially altered by the courts, but otherwise, they risk that the law will survive legal challenge and, by not having a SIP in place, will be subject to a less-flexible federal program.
Senate Majority Leader Mitch McConnell (R-KY) weighed in on the side of delay, warning states that submission of SIPs could subject them to “federal enforcement and expose [states with SIPs] to lawsuits.” If the states don’t cooperate, McConnell reasons, it will “give the courts time to figure out if [the CPP ] is even legal, and it would give Congress more time to fight back.” Supporters of the CPP responded that states who fail to design their own compliance plans will be at a “huge disadvantage.”
Meanwhile, the clock is ticking. As FERC Commissioner Philip Moeller pointed out, “we don’t have a whole lot of time … because summer’s coming.”

This week, the Chicago Tribune reports that the Citizens Utility Board (CUB) and the Environmental Defense Fund (EDF) filed a petition with the Illinois Commerce Commission (ICC) to require Commonwealth Edison Company (ComEd) to offer its customers the opportunity to participate in a three-year "community solar" pilot program. Just to get the players straight: ComEd is a regulated electric utility which services close to four million customers in northern Illinois. The CUB is the statutory representative of Illinois utility customers in all proceedings before the commission and federal agencies regulating the utility industry. (These organizations are more often called consumer or ratepayer advocates). On its website, EDF describes itself as a non-profit environmental advocacy and research organization whose mission is to "preserve the natural systems on which all life depends." The ICC is the state agency directed by statute to balance the interests of consumers and service providers "to ensure the provision of adequate, efficient, reliable, safe and least-cost public utility services."
Community solar is also known as "shared renewables," "solar gardens" or, sometimes, "virtual net metering." Essentially, in a community solar program, multiple electric utility customers invest in a solar project and share in the financial proceeds, whether that is from the sale of excess power to the grid and/or renewable energy credits, based on their level of investment. Most, if not all, of the customers will not actually be physically connected to the solar facility.
The benefits of community solar include reducing the level of investment required of the host residence or business and providing a means for all electric customers to experience the economic (and intrinsic) benefits of solar, even those who would otherwise be unable to install solar on their own residences or businesses (e.g., rented properties; shaded or otherwise unsuitable roofs). On the other hand, the soft costs of marketing and administering a program to multiple small investors can be significant, reducing those economic benefits.
Community solar has also met resistance with regulators; while working in government, I heard concerns about soliciting of consumers, particularly seniors, to "go green" without hosting a solar system. (An Arizona solar company was recently fined for deceptive sales tactics, including targeting of senior citizens and making false claims about potential savings, though not related to a community solar product.) Electricity pricing can be confusing for consumers, even when dealing with their local utilities. Regulators are still sorting through the complaints and litigation resulting from the large numbers of electric and gas customers who switched to third-party suppliers over the past couple years, enticed by low natural gas prices and what they thought were fixed-price contracts, but who then faced bills two and three times higher than "normal" as a result of price hikes during the polar vortex events of 2013-14.
The other major challenge for community solar has been to bring the utilities on board. Solar, like any form of distributed generation, will reduce the utilities' revenues. Here is where the Illinois proceeding may pave the way for community solar programs nationwide. In any such proceeding, the utility will be able to argue for recovery of administrative costs and fixed distribution costs, as well as for a return on the company's investment.
In a twist on traditional community solar, California utility PG&E will begin later this year to offer its customers a stake in solar energy purchased from facilities within the PG&E service territory. Customers will see the extra costs of the solar energy they consume, plus related program costs, with a credit for standard generation that is avoided, on their monthly bills. And, avoiding a frequent criticism of subsidized clean energy programs, the rate structure ensures that customers who don't participate in the program will not share in the costs.

When one talks of pipelines in recent days one hears nearly an incessant buzz about Keystone XL, as if that is where the real action is. But it isn't, notwithstanding the histrionics over President Obama's veto of S.1, the Keystone XL Pipeline Approval Act. The real action lies not with an 850,000 barrel per day oil pipeline, but instead with the natural gas pipelines that are needed to supply the natural gas electricity generating plants that will be required to replace, in part, 103 gigawatts of coal powered generation.
What are we talking about? Building Block 2 of EPA's Clean Power Plan posits the replacement of coal-fired generation with cleaner natural gas-fired plants. Natural gas plants are also part of the solution to compliance with the strict Mercury and Air Toxics Standards, which are also driving coal plants off the grid.
But to get and keep those natural gas plants on-line, the natural gas needs to get there and to do that it needs a means of transportation, which for natural gas, means pipelines.
How many miles of pipelines are needed? EPA concluded: "the power industry in aggregate can support higher gas consumption without the need for any major investments in pipeline infrastructure." But the Nation's reliability watchdog, the North American Reliability Corporation, politely disagrees. In its November 2014 review, Potential Reliability Impacts of EPA's Clean Power Plan, NERC noted EPA's position, but then commented:
"there are a few critical areas that likely will need additional capital investments. As an example, current and planned pipeline infrastructures in Arizona and Nevada are inadequate for handling increased natural gas demand due to the CPP. Pipeline capacity in New England is currently constrained, and more pipeline capacity additions will be needed as more baseload coal units retire."
And that was not the end of it. NERC concluded that more pipeline capacity was needed independent of Clean Power Plan retirements.
Further, as should be obvious, pipeline construction will not occur in an instant. NERC points out that "it takes three to five years to plan, permit, sign contract capacity, finance, and build additional pipeline capacity." In other words, planning and permitting of new pipelines is required now if the EPA's initial 2020 compliance date is to be met. But as we reported in a recent post, States aren't even drafting their implementation plans, much less making determinations about what plants to shut down and where pipelines need to be built.Which suggests that we should ask the miles-of-pipeline-needed question again. We have not seen that number but NERC reports that, based on EPA's own estimates for plant retirements due to the Clean Power Plan and other regulatory requirements (primarily the Mercury and Air Toxics Standard), "the power industry will need to replace a total of 103 GW of retired coal resources by 2020, largely anticipated to be natural-gas-fired NGCC and CTs.
We tried to compare 103 gigawatts to Keystone XL's 850,000 barrels of oil per day. We came up with a rather stunning number: the energy needed to replace the to-be-retired coal plants is almost 2000 times more than Keystone XL can deliver.*
Which leads us back to the beginning of this post: the real action in pipeline permitting is going to be in natural gas.
*A barrel of oil contains about 1700 kW-h of energy. So Keystone XL will deliver 850,000 bbl x 1700 kW-h or 1.445 x 10e9 W-h in one day. 103 GW of coal plants operating for 24 hours yields 2472 x 10e9 W-h.

McCARTER & ENGLISH CLIMATE CHANGE AND RENEWABLE ENERGY PRACTICE GROUP

The business case for the development of renewable energy projects, from biodiesel and ethanol to wind, solar, and distributed generation, is more compelling than ever as tax and regulatory incentives combine to attract investments. Emerging issues in environmental law and increasingly recognized principles of corporate social responsibility are encouraging public companies to voluntarily reduce greenhouse gas emissions, install clean energy alternatives, and invest overseas in projects under the Kyoto Protocol to respond to climate change concerns.